VLOV Inc. (VLOV) has been a designer, marketer and seller of casual high fashion apparel geared towards middle class men ages 20-45 in the People's Republic of China; and now, the United States. As of September 30, 2012, the distributors had 435 point's of sale across 11 provinces. Additionally, the Company owns and operates 19 stand-alone and store-in-stores in the Fujian Province.
VLOV carries the unique honor of being the first Chinese company to be invited to the Mercedes Benz Fashion Week in New York City, along with internationally recognized brands like Calvin Klein (NYSE:PVH), DKNY (NYSE:EL) and Ralph Loren (NYSE:RL). A video interview following the latest New York show can be viewed here. Mr. Qingquing Wu, the company's CEO and Chief Designer, also received the "Top 10 Designer Award" for two consecutive years at the Mercedes Benz China Fashion Week.
In January of 2013, Trinity Place Department Store, located in the financial district of New York City, announced VLOV would occupy the entire third floor of their building, showcasing their unique collection of clothing. Trinity Place is less than a quarter mile from the New York Stock Exchange. In February of 2013, the VLOV line went live for sale on the Trinity website. The Trinity store development has yet to be issued a press release by the Company. This is a critical legitimacy validation I expect will propel the company to a double digit stock price following VLOV's April fiscal year 2012 earnings report. Those familiar with the sector will observe that after Xinyuan Real Estate Co. (NYSE:XIN) announced a US (also New York City) presence, the stock has since rocketed to new all time highs.
Valuation and Strategic Options
Besides trading well under their cash position of $7.91 per share, with a P/E of less than 1, the company has active up-listing ambitions. With insider ownership standing at 51.3%, the public float of VLOV is a mere 1.26 million shares. According to email correspondence with VLOV's CFO Bennet Tchaikovsky, the up-listing to a senior stock exchange will be completed without an investment banker. The CFO also expressed the company has no hesitation in allowing the PCAOB to verify their customers, which is a new requirement for up-listing. Bennet went on to say that the company is well aware of the rampant fraud perpetrated by US listed Chinese companies, and feels that an successful up-listing (it would be the first in 2 years) would validate the company's legitimacy. The anticipated up-listing is also mentioned in VLOV's latest investor presentation dated November of 2012.
The company is obviously frustrated, and I believe that it has also been exploring going private options if their up-listing ambitions don't materialize. Though not confirmed to be VLOV, in this Dorsey brag sheet, they mention "Advising a Chinese apparel company (OTC) on going private options". There is only one OTC Chinese apparel company, VLOV.
Further Industry Recognition
VLOV Inc. has actively updated US and Chinese websites, and is making inroads with US Hollywood elite as evidenced by this video interview with venerated actor Alan Cumming. The Chinese high-fashion industry is still in its infancy, and explosive growth is only beginning. Simon O'Connell, who runs the trends consultancy "Society", explains why men play such an important role in the consumption of luxury goods in China in a February 2013 article written here. Simon has worked for just about every men's magazine in both the UK and US, including Esquire, FHM, and GQ. Note the reference to VLOV towards the end of the piece.
There are several other undervalued US listed Chinese fashion stocks, including Zuoan Fashion Ltd. (NYSE:ZA) and China Xiniya Fashion Ltd. (NYSE:XNY). These companies do not have assets in the US, and although still "cheap" by many standards, already enjoy much higher valuations than VLOV.
The company is making rapid inroads into the international fashion scene, and has recently announced a brand new series of Nordic inspired clothing that is already gaining fanfare. VLOV filed an NT-10K yesterday, as they have done in past. The 10K should be filed within the next two weeks. I strongly encourage active market participants to put this low floater on close watch.
Disclosure: I am long VLOV.OB.
Additional disclosure: This is a repost of my geoinvesting blog published here:blog.geoinvesting.com/?p=5689#gsc.tab=0